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Monopolies Commission looking into Britain's 800 million pounds sterling ice cream industry.

EC court case regarding restricted retail cabinet space long enjoyed by big boys has focused a lot of attention on the sweet frozen confectionery business. Meanwhile, innovative newcomers increasingly take on established brand names.

It is perhaps inevitable that companies who build markets from scratch should be jealous of competitors and do their best to keep them at bay with expensive legal and public relations campaigns.

Not so long ago it was the turn of Britain's public house system which came under public scrutiny when the "big six" brewery companies, attempting to keep out competitors' brands from the "independent" free trade houses, were referred to the Monopolies and Mergers Commission (MMC), which had the power to influence government thinking about the industry...and did! The brewery industry still shudders at the recollection of the MMC investigation in 1987-88, the results of which two years later compelled brewers with 5,000 or more houses to sell off half of any tied estate with more than 2,000 houses.

Now competition in the |pounds~800 million a year ice cream market is to be investigated by the Commission, the Office of Fair Trading (OFT) announced in May. According to the OFT, about 90,000 retail outlets have freezer cabinets, of which 42,000 are supplied by Unilever's Wall's ice cream company, which is linked to Birds Eye. Most of the rest come from Nestle's Lyons Maid.

The legal tussle broke out a few years ago when Unilever obtained a legal injunction in Ireland preventing Mars lines from being stocked in their freezers. Under pressure from Mars, however, the European Commission last year suspended arrangements which Unilever and Scholler Lebensmittel, a leading German ice cream company, were using to exclude competitors from retail outlets.

A press release which appears to have been prepared by Unilever in May quotes the new chairman of Wall's, John Sharpe, as saying: "I am confident that the superb distribution system for impulse ice cream used by all serious ice cream manufacturers in the UK will be found to be fair and in the best interests of both retailers and consumers. The exclusive use of our cabinets is an integral element of an efficient distribution system which maximizes the availability of ice cream yet keeps costs down".

Really! It is surprising then that Birds Eye was not encouraged to adopt a similar policy with supermarkets years ago.

British supermarkets have always followed the American example, however, in refusing to sign over cabinet space to manufacturers, leaving the brands to compete for customer loyalty with advertising, new product ideas, promotions, and the kind of excitement that ice cream companies, uniquely, seem able to generate.

Wall's had things its own way for decades until Mars, an American company, moved in with ice cream-filled Mars bars. It followed up with a whole slew of similar products that even Wall's found it had to imitate.

In the meantime, another USA company, Haagen-Dazs -- which is now owned by the British giant, Grand-Met -- has been making strides all over Europe and has even built its own manufacturing facility in northern France.

What is interesting about Haagen-Dazs is the way it has to stand back from the Wall's/Mars quarrel over cabinets by doing its own thing effectively and with style. Mars' publicity speaks of "hand-held frozen snacks made with premium ice cream and real chocolate." It sounds rather like the kind of publicity dished out by Wall's 25 years ago at a time when the UK industry had not yet experienced dairy ice cream or real chocolate.

Before the launch of the Mars ice cream snack in 1989, the chocolate ice cream market contained many unbranded lines. They featured chocolate-flavored coatings instead of real chocolate, along with a lot of vegetable fat. Overall, according to Mars, there was little emphasis on quality.

Mars Confectionery says that it realized then that in a market where products were unbranded and frequently lasted no more than one season, opportunities for developing branded products were enormous. The key would be to use only top quality ingredients, and trumpet same to build consumer loyalty. The development of an ice cream snack with all the familiar taste and quality of a Mars bar began in 1986.

Its impact on trade and consumer alike has led Mars to expand its frozen snack range to include Bounty and Snickers ice cream bars, Galaxy Dovebar, Milky Way Minis and, more recently, the Dark Chocolate Bounty ice cream snack. And just recently two more initiatives were launched: Opal Fruits fruit ice snack (the company's first venture into the |pounds~100 million frozen refreshment snacks market) and Mars Minis.

In its struggle with Wall's, Mars contends that cabinet exclusivity unfairly inhibits entry into the ice cream market and penalizes smaller producers, particularly in the many small retail outlets which have room for only one freezer.

Unilever argues that it is entitled to exclusive use of its own cabinets and that the company's strength in this market stems largely from its products and marketing expertise.

The Anglo-Dutch giant also points out that six companies have entered the UK ice cream market in the past five years. No names are specified, but it is not difficult to guess that among them would be Mars, Clarke Foods (now owned by its strongest rival), Nestle and Haagen-Dazs. After only two years in Britain, Haagen-Dazs has reached its highest market share of 28.5% of the premium ice cream sector (Nielsen: December 1992). The brand has single-handedly driven growth of this category, which increased to 16% of the total market last year.

Despite limited development in the overall market in 1992, two factors supported the growth of Haagen-Dazs last year. The premium "take home" sector expanded by 20% and its stick bars performed well in the impulse sector. This was at the expense of choc bars which showed a decline of 27%, according to Haagen-Dazs figures.

Haagen-Dazs ice cream can be found in UK supermarkets, but the company has not been too proud to set about re-educating the palates of the British by opening 18 of its own shops dedicated to the kind of rich dairy ice cream with which its name is associated in Japan, Singapore, Hong Kong, France, Germany, Canada, Sweden, Belgium, Italy and the USA. In the UK there are now also eight mini-shops in Warners multi-screen cinemas.

The brand's strategy for 1993 will include the introduction of new value-added flavor lines following the retail launch of Belgian Chocolate and Pralines and cream in June. Increased production flexibility for the UK market has resulted from the opening in late 1992 of Haagen-Dazs' first European manufacturing facility in Arras, Pas de Calais, France. Calling for an investment of US $60 million from parent company Grand Metropolitan, the new plant's output will serve the entire European market.

Marketing investment in 1993 will involve a 200% rise in media spend and a substantial sampling program aimed at two million consumers through in-store activity and via presence at major events.

German FF Group Sponsors First InterCool Exhibition

Dusseldorf is the site of the first InterCool trade fair set for Oct. 6-9, 1994. The event, sponsored by the Deutsches Tiefkuhlinstitut (German Frozen Food Institute), will showcase not only frozen foods and ice cream, but the latest technology to produce and store them.

The fair expects to attract buyers from all sectors of the retail food trade, and also from restaurants and caterers. It will be held every other year, alternating with the InterMopro dairy products show.

Ice Cream for a Dime Ben & Jerry's Porusskii

Russians can't afford too many luxuries these days, but at the Ben & Jerry's ice cream store in Petrozavodsk, they can get a one-scoop waffle cone for a dime and a pint of ice cream for 80 cents.

It's a long way from Vermont, USA, or even from Villanova, Pennsylvania, the home town of Greg Quinn. He manages the Ben & Jerry's outlet in the capital of Karelia, which is sister state to Vermont, even as Petrozavodsk is sister city to Duluth, Minnesota. Got all that?

Never mind. What's important is that the store attracts more than 3,000 customers a day, more than most ice cream parlors in the United States. And they all get what they come for at the first Russian Ben & Jerry's: Vasili Mikheyev, Russian partner in a joint venture with the American company, produces 45 flavors at a plant behind the store, including several fruit-based varieties created right there and not available in the US.

Chocolate is still the most popular flavor; others include mocha, cinnamon, mango and cappuccino. Quinn plans to introduce Cherry Garcia this summer. Besides the ice cream itself, young people are attracted to the store by blasts of rock music from a stereo system, and T-shirts and sweat shirts reading "Ben & Jerry's -- Vermont, Karelia," and "Karelia's Finest."

Scholler: More Sales, Fewer Returns In Year of Major Capital Investment

Sales rose a respectable 15.7% to DM 1,813 billion for the Nuremberg, Germany-based Scholler Group during 1992. But profits hardly matched the increase, it was announced at the company's annual press conference. Details regarding the latter were not provided.

Domestic business accounted for the lion's share of volume, bringing in some DM 1.5495 billion compared to DM 260.8 million generated from exports. And not surprisingly, ice cream represented almost three-quarters of all sales in Germany, while the contribution of frozen food sales to the total was 9.1%.

Expansion in eastern Europe is starting to pay off in spite of substantial initial start-up costs. While exports still reflect a relatively small percentage of overall business, they nonetheless posted a 44% increase in volume. This was due mainly to successful ice cream marketing efforts in Hungary, Poland, the Czech Republic and Slovakia.

High outlays for construction of new production facilities and establishing a distribution system have had negative effects on the profit picture, however. In all, Scholler invested about DM 85 million last year. For 1993, another DM 41 million has been budgeted for purchasing and upgrading buildings, plant and equipment, freezer cabinets and delivery vehicles. Because of the high investment expenditures, capital has been augmented by DM 50 million to DM 250 million.

While the trend toward premium products is continuing, major differences in sales among markets in Europe's east and west can be discerned. Restaurant trade plays a secondary role in eastern countries, where even the sales of family-size packages are far below western levels. The individual-portion and impulse ice cream sector by far dominates activity in the east, resulting in a low per capita consumption rate that compares with the level reached in the Federal Republic of Germany during the 1950s.

On the non-ice cream frozen food front, Scholler grossed DM 141.4 million in 1992, which reflected a rise of 8.2% over the previous year. The figure includes sales of the sub-brand Motta, which is merchandised in the retail sector.

Meanwhile, production is expected to begin this summer at a new frozen food plant in the northern Germany town of Uelzen. The factory will produce pre-baked and frozen sandwich buns and croissants.

Elsewhere, completion of an ice cream factory in Namyslow, Poland, is expected by early 1994. Some 120 workers will be employed there.
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Title Annotation:includes related article
Author:Kemp, Graham
Publication:Quick Frozen Foods International
Article Type:Industry Overview
Date:Jul 1, 1993
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